TOKYO/HONG KONG -- China's cyberspace regulator deepened turmoil in the country's tech sector on Monday by announcing national security-related reviews of two more companies that recently listed in the U.S., a day after unveiling curbs on ride-hailer Didi Global in the wake of its $4.3 billion New York IPO.
The Cyberspace Administration of China said it was looking into Huochebang and Yunmanman, which are owned by Full Truck Alliance, and Boss Zhipin, a recruitment site owned by Kanzhun.
Kanzhun, which raised $912 million, listed in the U.S. in June. Full Truck Alliance, colloquially referred to as China's "Uber for trucks," also listed in the U.S. last month after taking in $1.6 billion.
The CAC said the reviews were "to prevent national data security risks, maintain national security and protect the public interest." It said all the companies had to stop registering new users while the reviews took place.
The moves extend a crackdown by the CAC, which on Sunday ordered Didi to remove its app from app stores, accusing the company of serious violations of laws on collecting and using personal data.
The move casts a shadow over Didi, which listed in the U.S. on June 30 and is heavily dependent on China for its profits, and is likely to raise concerns over more regulatory action against U.S.-listed companies.
"IPO investors must have confidence that they aren't buying shares in companies that will immediately be fined or sanctioned," said Brock Silvers, chief investment officer at Hong Kong-based private equity firm Kaiyuan Capital. "Should regulators fail to bar companies under investigation from accessing public markets, public markets may start to rethink their long-standing fondness for China tech."
The investigation into Didi is needed to safeguard individual privacy and national security because the company holds a trove of data, the Communist Party-backed newspaper Global Times said on Monday. The company holds so much data that it can undertake big-data analysis of individual behavior and so must face stricter oversight, it said.
Global Times said strict supervision was especially necessary for companies such as Didi, which are U.S. listed and whose biggest external shareholders are foreign companies.
Didi over the weekend denied it had handed over Chinese user data to the U.S. after its listing on the New York Stock Exchange. The company said it stores all Chinese user and road data on servers in China.
The company acknowledged the CAC action may have an adverse impact on its China revenues and said it would "strive to rectify any problems". It said its global operations were otherwise unaffected. Didi's app will no longer be available for download but can still be used by anyone who had already installed it, Didi said in a statement.
Full Truck and Kanzhun did not immediately respond to a request for comment.
The regulator's action triggered a sharp sell-off in shares of groups invested in the companies under CAC scrutiny. Shares in Japan's SoftBank Group, the largest outside investor in Didi and also a backer of Full Truck Alliance, fell 5.4% on Monday to their lowest level since December.
SoftBank poured nearly $11 billion into Didi before it went public in the U.S., and its Vision Fund has a 20.2% stake, according to filings. The Vision Fund also held a 20.3% stake in Full Truck Alliance when it went public on June 22.
Shares in China's Tencent Holdings, which backs all three companies under investigation, dropped 3.6% in Hong Kong to their lowest level since Dec. 29.
The CAC's investigations continue a monthslong Chinese regulatory crackdown on technology companies. Authorities have probed antitrust breaches plus issues concerning data security and privacy in seeking to limit the growing clout of technology companies and their billionaire founders.
Prominent in the crackdown has been Alibaba Group Holding and its financial affiliate Ant Group. Ant was prevented from carrying out what was expected to be the world's largest IPO last November when regulators tightened controls over its lending business. Meanwhile Alibaba was hit with a record fine of 18.2 billion yuan ($2.75 billion) in April for anti-competitive practices.
More than 30 other Chinese companies have faced tighter regulator scrutiny, including food delivery company Meituan, Tencent and online retailer JD.com.
The CAC announced its review of Didi late on Friday, sending Didi's shares down more than 5% in New York. They closed at $15.53, having begun trading last Wednesday at $14 after the IPO. U.S. markets will be closed on Monday.
Law firms including Rosen Law and Johnson Fistel said they are beginning an investigation into whether Didi issued materially misleading business information to investors, a first step in what could turn out to be a shareholder action lawsuit.
Hao Junbo, chief lawyer at the Hao Law Firm in Beijing, also told the Global Times that some of Didi's investors are considering a class-action suit to seek compensation.